As investors grapple with the dominance of global equity market returns by a handful of US technology companies, the search for genuine diversification opportunities has become more pressing. Latin American government debt has emerged as one.
This time last year, Argentina went to the polls and the rightwing coalition won a decisive victory in midterm legislative elections. The market response was immediate, with the yield spread on Argentina’s dollar debt over US Treasuries dropping by 4 percentage points overnight. The subsequent 12 months have seen a series of elections across Latin America with similar outcomes for rightwing parties in Chile, Peru and Colombia.
Since the start of 2025, they have enjoyed a 50 per cent return in Latin American local currency debt. That’s a similar uplift, but with considerably lower volatility than the Nasdaq 100 index of US technology stocks over the same timeframe.
First, it is a way to tap into regional growth that is harder in the equity market. The total value of shares in the MSCI Emerging Markets Latin American index is less than $1tn. In contrast, government debt outstanding across the region is close to $6tn, with returns principally dictated by currency, not commodity market, developments.
Source: Financial Times Markets · Summarized by HeadlinesBriefing